China and EU talks to avert clothes crisis

Last updated at 10:30 25 August 2005

China and the European Union are locked in talks to revise a two-month-old trade pact that has led to millions of trousers, sweaters and other textile products from China being blocked by EU customs officials.

The June 10 deal, which capped growth in 10 lines of Chinese textile exports at 8-12 percent a year, was hailed at the time as a sensible response to a deluge of low-cost clothes from China following the scrapping of global textile quotas on January 1.

But most of the new export ceilings have already been reached, leading to vast quantities of garments piling up in EU warehouses and ports.

Retailers are furious that they cannot take delivery of items such as bras and blouses worth hundreds of millions of euros that they have bought for the lucrative Christmas shopping season.

'Serious glitch'

EU Trade Commissioner Peter Mandelson acknowledged on Wednesday that there was a "serious glitch" in the June agreement and that a pragmatic solution was needed.

Teams of technical negotiators were due to sit down in Beijing later on Thursday to explore possible solutions.

These include transferring quotas that have not been filled, such as for cotton fabrics, to more popular lines, "borrowing" from next year's quotas or allowing EU importers to bring in goods ordered before the June 10 curbs.

Experts have long predicted that China, with its huge, modern factories and cheap labour would be the big winner from the free-for-all in global textiles after quotas were scrapped.

Beijing went along with the June agreement because, without it, the EU would have been permitted under world trade rules to cap growth in China's textile exports to 7.5 per cent a year until the end of 2008.

With European retailers standing up to the lobbying power of EU textile producers, diplomats said the issue gave China the chance to make the case that its super-cheap exports may be the bane of less efficient competitors but are a boon to shoppers.

"In today's world it is very tricky to buck the trend of free trade," the China Daily said.

"Protectionist steps may sometimes seem to be politically correct moves in the short term. But they will discourage the upgrading of uncompetitive companies. They will also damage the interests of consumers and other groups of companies," it said.